When I first started trading, I thought that I was cursed. Every single trading system that I came across would fail after I signed up. This happened to me more than a dozen time. After more than six years of trading and developing my own trading systems, I finally understand why it was.

When a trading system was winning, the words would get out, more people sign up as the system continued to win. Once, I sign up, the system has gone through a long period of winning; hence, it is natural for the system to give some back i.e. drawdown. You must understand that drawdown is the risk in trading, and that risk & reward go together. You can't have the reward without the risk in trading.

If you know that the maximum drawdown of a system is 4,000 pips, it is best to enter the system after it started losing approximately 2,000 pips. This way you know that your maximum drawdown is 2,000 pips to your account before the system recover.

August 3, 2010 UpdateLooking at the last five trades of Jasmine, we had five winning trades and one losing trade. From the four winning trades, we have one trade at +116 pips, another at +149 pips, and two trades hitting their target at +220 and +240 pips. These four winning trades combined for a total of 725 pips. Of these winnings, we had to take away 80 pips for a losing trade that got stopped out. Still we gained 645 pips for the last 5 closed trades.

Jasmine is now at 3,000 pips profit, and I hope that she can keep it steady above this level.

Today we have a Mexican Standoff with Jasmine’s six subsystems. Subsystems 1, 4, and 6 are in buy trades at 1.32068, 1.32055, and 1.31656. These 3 EURUSD buy trades combined for a floating loss of 135 pips. On the other hand, subsystems 3, 7, and 8 are in sell trades at 1.31796, 1.31549, and 1.31550. These 3 EURUSD sell trades combined for a floating profit of 40 pips. The situation is too early to tell which direction is correct.

August 5, 2010 UpdateOur Mexican Standoff resulted in little actions for Jasmine. The 3 subsystems that were in the EURUSD sell trades exited their trades with +6 pips, -3 pips, and 52 pips. Presently, we have five subsystems in five buy trades of the EURUSD. We are still in holding pattern, but it is nice that we are floating with 133 pips in profit.

I am looking for Jasmine to break the 3,500 pips profit within the next two weeks. Let’s wait and see.

You have requested discount for forex trading accounts with less than $2,500. I have heard your concerns, and I have added the mini service to accommodate your needs.

Using our trading systems:1) Our software is targeting 40% return per annum. You can adjust the trading lot size for more aggressive return to accommodate your trading objective i.e. 120% per year. You must understand that higher return will results in high risk since risk & reward go together.

2) You must always plan for the worse drawdown. Alternatively, it is best to enter a system after it has gone through some drawdown.

3) You must be discipline to follow a trading system, and it is best not to jump from one system to another.

4) It is best to enter our systems during their consecutive losing trades and not during the consecutive winning trades.

August 8, 2010 UpdateJasmine’s six subsystems are all in buy trades with the total floating profit of 598 pips. Let’s identify each subsystem with their stop losses and take profits.

Subsystem 4 entered the EURUSD buy trade on August 4 @ 15:00. The entry price was 1.32055 with a stop loss of 100 pips and a take profit of 220 pips. It is currently floating with 80 pips profit.

Subsystem 3 entered the EURUSD buy trade on August 5 @ 09:00. The entry price was 1.31262 with a stop loss of 100 pips and a take profit of 240 pips. It is currently floating with 159 pips profit.

Subsystem 8 entered the EURUSD buy trade on August 5 @ 10:00. The entry price was 1.31492 with a stop loss of 100 pips and a take profit of 240 pips. It is currently floating with 136 pips profit.

Subsystem 7 entered the EURUSD buy trade on August 5 @ 18:00. The entry price was 1.31570 with a stop loss of 100 pips and a take profit of 240 pips. It is currently floating with 128 pips profit.

Subsystem 6 entered the EURUSD buy trade on August 5 @ 19:00. The entry price was 1.31620 with a stop loss of 100 pips and a take profit of 240 pips. It is currently floating with 123 pips profit.

Subsystem 1 was the last to enter the EURUSD buy trade on August 6 @ 16:00. The entry price was 1.33157 with a stop loss of 80 pips and a take profit of 260 pips. This trade is currently floating at a loss of 30 pips.

Subsystem 4 entered the EURUSD buy trade on August 4 @ 15:00. The entry price was 1.32055 with a stop loss of 100 pips and a take profit of 220 pips. It finally closed its buy trade today August 9 @ 14:00 with 37 pips. It is not too bad as the EURUSD has dropped more than 125 pips.

Subsystem 3 entered the EURUSD buy trade on August 5 @ 09:00. The entry price was 1.31262 with a stop loss of 100 pips and a take profit of 240 pips. It closed its buy trade for 158 pips on August 9, 2010 @ 08:00.

Subsystem 6 entered the EURUSD buy trade on August 5 @ 19:00. The entry price was 1.31620 with a stop loss of 100 pips and a take profit of 240 pips. It also closed its buy trade for 80 pips on August 9, 2010 @14:00.

As we are updating the daily results, subsystem 3 has sold the EURUSD at August 9, @08:00 and exited its trade with 69 pips profits on August 10, @ 02:00.

We could have done better, but we should be happy with 344 pips profit for the last four trades.

August 11, 2010 UpdateIt was a roller coaster ride for everyone during the past two days with all the slow down in economic announcements. What does this mean for the technical traders and automated trading systems? Not much really! We need news to create volatilities in the market regardless of bad or good news. Leave it to the fundamentalists to decipher the meaning of each announcement.

There are technical traders who try to mix fundamental news with their short term trading. You have to remember that fundamental news create long term trend and cannot be mixed with short term technical trading. The best thing is to focus on the chart and don’t get caught on the wrong side of the trade without a stop loss. It is uncanny to be more than 60% correct after 1,000 trades; hence, don’t bother trying to out-wit the market. As you are trying to out-wit others, there are smarter and brighter traders out there trying to out-wit you!

We haven’t covered Leah for a while; hence, we will talk about it today. Leah is vacillating between 2,000 pips profit and 3,000 pips profit for the last four weeks. The past several days, Leah's profit has dropped more than 600 pips. This is to be expected as it is impossible to have a linear rise in profit without drawdown. This is the reason why, we should look at return on investment ROI based on yearly results not monthly or weekly. One of the common mistakes of automated trading users is to switch from one trading system to another as they experience some drawdown. This is the cardinal sin! You should pick a trading system and stick with it for at least four months. The best time to turn on a trading system is when it is losing and not when it is winning.

As it stands, Leah is still up 2,000 pips for the last 2.5 months. It is currently in a sell trade with 165 pips floating profit. See chart below:

I am currently reading the Art of the Advantage, 36 Strategies to Seize the Competitive Edge by Kaiban Krippendroff. In the first stratagem, he goes into the example of competitive pattern between Coca-Cola & Pepsi. I thought it was wonder, and it can be use as an analogy for forex automated trading. In the book example, Coca-Cola innovates, Pepsi copies, Pepsi innovates, Coca-Cola copies, and the competitive pattern repeats. Coca-Cola and Pepsi play cat and mouse with each other, following closely, but never falling too far behind. When one lurches forward, the next pounces...but the pounces are NEVER FATAL.

The key lesson here is that each pounce is never fatal. Similar to automated trading, we are not looking to have a single trade that is going to yield us 2,000 pips profit or to make us rich instantaneously. Alternatively, we always trade with a stop loss such that one losing trade will not wipe out our entire trading account, i.e. the fatal pounce. Think of it as a give and take in Forex trading. We can’t win all the time and constantly take money from the market. We have to give some back as it is a back and forth relationship. Think of it as a dance but with automated trading, we are leading. We win some, give some back, we win some more, and then we give some back. The point is to respect the market and to avoid dealing the fatal blow to each other. Remember, it is a dance, and we are leading; hence, we will make money if we are patient.

As we stand, Haley is currently at $12,560 in equity. This is 2,560 pips profit over the period of 2.5 months. During this 2.5-month period, Haley dances with the market with winning and losing trades. Haley went from $10K to $12K, back to $11K, then to $12.5K, back to $12K and now at $12.5K. We should think of trading as a long term relationship with the market. We can’t take an enormous withdraw from the market without future consequences. It is better to give and take with a net profit in the long term.

After the huge move on Tuesday, the market is consolidating. Leah’s subsystem 7 entered a sell EURUSD trade on August 13 @ 16:00. The entry price was 1.28244 with a stop loss of 100 pips and a take profit of 240 pips. The trade is profitable with 66 floating pips. Leah’s subsystem 8 entered the EURUSD sell trade 4 hours later at 20:00 at 1.27755 with a stop loss of 100 pips and a take profit of 240 pips. This trade is also profitable with 19 floating pips.

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trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you
cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.
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